Investment Newsletter Insights

Small-cap investors return to risk and so do two permabears

Some investors were likely wondering if small-cap stocks would experience their traditional new year strength, a phenomenon otherwise known as the January Effect. In this bear market, of course, relative strength can simply mean one group of stocks manages to lose a bit less than the others.

And according to Mark Hulbert, small-cap stocks have lost less than their larger-cap peers so far this year. While such a performance is unlikely to spark widespread optimism, Hulbert believes that this performance suggests that at least some investors are tentatively pursuing risk once again. And a renewed appetite for risk is a key ingredient for an eventual market turnaround.

In addition to small-cap investors, two noted permabears ventured into the bullish arena based upon their technical analysis. Peter Brimelow says that although both Joe Granville and Richard Russell may have turned bullish at inopportune times, their previous bearish positioning enabled each service to lose roughly half as much as the market did in 2008. Both editors now believe that the market's long-term trend has turned bullish, though each has technical contingencies that must be met for them to continue this posture. -- Ari Charney, Portfolio Analyst

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